2023-11-15 08:15:28 ET
Gilead Sciences, Inc. (GILD)
Jefferies London Healthcare Conference
November 15, 2023, 04:00 AM ET
Company Participants
Andrew Dickinson - Chief Financial Officer
Conference Call Participants
Michael Yee - Biotech Analyst, Jeffries
Presentation
Michael Yee
Okay, good morning. Thank you everyone for joining us on a morning session here on day two of the Jeffries Global London Healthcare Conference. I'm Mike Yee, one of the biotech analysts at Jeffries, and I'm really pleased to have with us up here on the stage the Chief Financial Officer of Gilead Sciences, Andy Dickinson. Andy, great to have you with us
Question-and-Answer Session
Q - Michael Yee
I would love to just maybe take a step back, talk about your outlook on 2024, but really sort of summarizing how Gilead has been positioned in 2023? Just reported earnings a couple weeks ago, a lot of people are obviously thinking about growth at Gilead, core business, pipeline, and how you position for 2024? So maybe just coming away from third quarter, give us a snapshot about how you're feeling about things and we'll get into a little more of the details.
Andrew Dickinson
Yes, no, thank you. First of all, thank you for having us. It's been a great conference. Appreciate it. It's good to see everyone. Thank you for joining us. 2023 has been another great year for Gilead, and 2024 is set up for a lot of very important catalysts as you know. So, maybe just to kind of step back, for those of you that haven't followed Gilead that closely, we are the world's largest virology Company.
We have a thriving and growing oncology business. When you look at our financials, if you look at our base business, which is the vast majority of our sales, excluding our market leading COVID antiviral that's used for hospitalized COVID patients, which I'll talk about, very important for us and for patients. But if you look at the base business, in the last two years, Gilead has returned to growth in a very meaningful and important way.
Last year, our base business grew 8% year over year. This year, if you look at our updated guidance, we're projecting 7% to 8% growth. And that growth is being driven both by the core antiviral business, HIV, we have a much more stable hepatitis franchise, for those of you that follow the Company, and the oncology business, which has two legs, our antibody drug conjugate, Trodelvy, which is an incredibly exciting medicine, as well as our cell therapy business at Kite, are both driving significant growth.
So, we really have accelerated our growth as a result of the investments that we've made. So to your question, again, 2023, we have updated our guidance, another very solid year, we continue to execute. The big difference between '22 and '23, going into '24, is that the last three or four years with the new management team have been a period of investment. We've substantially increased the size and quality of our portfolio. The amount of money that we're investing in R&D is now on par with the rest of the industry.
For years and years and years, we underinvested in R&D and had a much smaller pipeline than the industry. So we now have a very strong pipeline, a broad pipeline, one that we expect to drive significant growth in the future. We're growing at or above the median in the pharma industry, which is very exciting, and we think is just the beginning.
And now going forward, we have a whole host of clinical catalysts that are coming up. So in 2024, I want to make sure everyone in the back can hear me, because I know it's loud there. So if you cannot hear me, please let me know. But in 2024, we have a number of clinical catalysts across the entire portfolio.
For example, in the first half of next year, we have our phase three, second line, non-small cell lung cancer data for Tredelvi. We also have our Lenacapavir prevention data, phase three prevention data for HIV coming by the end of next year, at least one of the two pivotal trials. So then that's just the tip of the iceberg.
You'll hear more about this in the coming months in terms of where we're going. As far as specific projections for 2024, obviously we'll provide our updated guidance early next year at the end of January or February. We typically do that on our end of year conference call.
What we can say, what we've said, and I'll reiterate, is that we're in a growth phase and that we expect to grow at or above the median of the pharma industry. And we expect a significant acceleration of our top-line growth over the coming years as all of these clinical catalysts play out. So it's a really nice setup for what I describe as a new Gilead.
Michael Yee
Okay, that was a great snapshot. Now you -- two parts. One is coming out of third quarter earnings. There were some questions around the core HIV business that quarter. The first two quarters were quite strong. The third quarter, there was a comment about HIV pricing a little bit. I think there was maybe some confusion around that because you're getting a little bit of the weeds of the different channel mix.
And some people were just wondering, can you comment about the core HIV business and pricing and how you're feeling out of third quarter? Explain that a bit. And then how you're thinking about that for 2024. I know you're going to give specific guidance, but you said acceleration. So you're saying you can grow faster in '24 than '23?
Andrew Dickinson
Well, certainly after we have the PrEP data, we expect a significant acceleration because the prevention market, as you know, is very large and largely untapped. And our every six months...
Michael Yee
So for those, so the phase three capsid PrEP data, which would be a once every six month injection?
Andrew Dickinson
Should substantially accelerate, re-accelerate growth in HIV. That doesn't mean though that HIV is not a growth business in the base business. So if you just step back to your question today, and if you go back to kind of our second quarter call, you're absolutely right, Michael, that the HIV business grew substantially in the first half of the year.
Part of that, and again, you have to break the HIV market into the two different businesses, the HIV treatment business, which is the majority, significant majority of our sales, again, led by BIKTARVY, which is the absolute gold standard treatment for HIV. BIKTARVY is a $12 billion a year drug and growing. It's used in 62% of naive patients in the United States, a very high percentage of naive patients outside of the United States, in other major markets, and it's still growing. It grew two percentage points in the United States last year.
So the HIV business is growing for treatment about 2% to 3% a year in terms of volume, demand growth in the major markets. In other markets, it's growing much faster than that. Prevention is growing much faster. In the third quarter year over year, the prevention market globally grew 15%.
Prior to that, it was growing high teens. Last year, as you know, it was growing at 20-plus percent. The prevention market is largely untapped. At most, in a very narrow definition of the prevention market, the prevention market is maybe a third of its way kind of in the evolution in terms of the potential of the prevention market. \
So when you combine prevention and treatment, the HIV market is growing. It's going to continue to grow. Prevention is helping in terms of the growth of the treatment. Yes. So let me be clear because this is probably one of the most important catalysts of next year is that the phase three capsid data for prevention is important because you're taking, giving the opportunity to prevent HIV with a single long-acting injection.
Michael Yee
Exactly.
Andrew Dickinson
Yes. No, it's transformative. I want to make sure I finish the point though on 2024 because it's important..
Michael Yee
Kind of the So that was one of the drivers.
Andrew Dickinson
Yes, that's one of the long-term drivers. But in the short run, part of what's happening is as the global economies have recovered from the pandemic and as unemployment has come down, more patients have moved from lower priced treatments, reimbursement options in the United States in particular to commercial pay insurance. So in addition to seeing the demand growth, you've seen an increase in the net price realized for our medicines, for us and other companies.
We highlighted starting six months ago that the market was starting to normalize and that that trend had kind of run its course and that you're still going to see growth in the HIV business. And as I said earlier, you're going to see growth in our base business overall, including the oncology growth, but you won't have that tailwind. That doesn't mean that the HIV business is not growing.
So just to finish the point on the third quarter, I think there was a bit of an overreaction in terms of the market, interpreting some of our comments as the HIV business overall would grow at 2% to 3%. The point is the demand growth in HIV treatment globally is 2 to 3%. The prevention market is growing much faster. It's going to continue to grow substantially over time.
And then to your point, you start layering on top of it all of the new product launches that we expect to have in HIV. One of them is in prevention with this absolutely transformative every six months subcutaneous injection of Lenocapavir, which is an HIV capsid inhibitor, first approved. It's already approved for treatment. This is not theory. This is a drug that's already approved for the hardest to treat HIV patients that have HIV.
And now we're studying it in the phase three studies for prevention, which scientifically we feel like is a lower bar in terms and the probability of success should be very high. Remember we already have two drugs, our oral dailies approved historically for prevention. We are the leaders in this space and capsid should really unlock substantial growth in prevention. Let me pause there.
Michael Yee
We're thinking and we'll move away. The final thought on HIV is that we believe that the long-acting capsid data next year would benefit you first certainly from a pricing and compliance standpoint because the people who are on PrEP are not necessarily fully compliant. And then secondly, it could expand the market and grow utilization because obviously a very convenient once every six month injection is great for patients.
Andrew Dickinson
Yes, exactly. Look, I mean, the key in prevention...
Michael Yee
That's the driver.
Andrew Dickinson
Yes, I mean, again, to step back and kind of help people understand this, many people that take the existing approved therapies, including our two daily pills for prevention, take the drugs on demand. So if they fill a 90-day prescription, they may use 15 days, 20 days, some people use 60 days.
But when you look at the market, again, just to put it in context, the prevention market when Truvada, which was the first double daily oral of ours that was approved for PrEP went generic, the global market was about a $2 billion market for prevention and the vast majority of the sales were in the United States. The market has continued to grow at a very high rate since that point in time.
Today, the branded market would be, I would guess, at least a $3 billion plus market. And again, it's still only in the United States, predominantly in about a third of the market tapped. So if you think about Lenacapivir as an every six month injectable that ensures compliance, which means you should get much better prevention and efficacy, it should open up not only a substantial market in the United States, but it will open up a much more substantial market we expect globally, including in Europe and Asia. So it should...
Michael Yee
Are you suggesting that you should have reimbursement much more broadly than the current Descovy for PrEP? Because I'm not sure that there is wide reimbursement beyond the United States.
Andrew Dickinson
That's exactly right today. But yes, the expectation is when, and again, if you look at the proof of concept, one of the other companies in this space has an approved long acting therapy that is an injection, but a regimen that's less desirable for patients. The important thing for investors is if you look at their data, their data demonstrates exactly what you'd expect, that when you guarantee adherence with the long acting injectable, you get better clinical outcomes. And that data should support pricing determinations in Europe.
Michael Yee
So the European pharma Company that has that approved, and it's okay, GSK, I think they're in the other room, that they have it approved, is it reimbursed?
Andrew Dickinson
Again, I should know that. I don't know how...
Michael Yee
They're working on reimbursement country by country. They're working on reimbursement, certainly in the United States. And the point is that this is, looking at any Wall Street model, there's not much revenues in this, in models, because there has not been reimbursement for daily pills for prevention. The fact that this is super compliant and guarantees efficacy is something that
Andrew Dickinson
Should open the global market.
Michael Yee
Okay. Yes, should open the global market outside of just the United States. Okay. Last point on HIV, because it came up recently this week, and also people have been asking about it since the earnings call. Can you just comment about the recent, or any updates, or what the timelines are for the various court cases going on in the US? This is something that has class actions and others have impacted. Sanofi and GSK as well. So for Gilead, is there any updates on the current HIV cases that are pending in the United States?
Andrew Dickinson
Sure. Again, maybe I just step back for those of you that are not familiar with this. This is a set of cases. These are not consolidated. Well, they are consolidated, but they're not class action lawsuits. There's about, and these cases are based on a very novel legal theory that you would really only see, unfortunately, in the United States. So this is a theory that we had a duty to innovate and to bring our TAF-based HIV regimens to market sooner than we did.
This would suggest, for instance, that automobile manufacturers need to bring a safer car earlier than they can. It's outrageous and it's something that, again, we see no merit in the cases. There are 25,000 plaintiffs in the California state courts. There's 4,000 plaintiffs in the federal courts. We'll work through this methodically. The latest updates...
Michael Yee
What's the timing?
Andrew Dickinson
Yes. Yes, I mean, maybe most importantly, you kind of step back again. In the state court case, just to help people understand it, the plaintiffs have admitted that the product is not defective. These are lifesaving products. They're still on the market. The risks that they're claiming were in the label from day one. So the plaintiffs have stated the product's not defective and there was no failure to warn. They believe, however, that we should have brought out TAF earlier than we could have and that we actually did.
So when you look at where the state of the cases is, a significant portion of the cases have actually been dismissed over the last year. So just to give you context, in the federal case, which is a smaller set of cases, 4,000 or 5,000 cases, I believe 27% of the cases have already been dismissed because it becomes clear that most of the plaintiffs cannot get an expert to support their claims that they either even took the drug or that they were damaged in any way.
In the state cases, 14% of the cases have been dismissed. And we're just kind of methodically working through it and managing this. We don't see, I mean, at the end of the day, again, these are completely without merit from our perspective. We're confident that we're going to get the right outcome. We have an important, there's a California appeals court actually issued an order to the plaintiffs in the state court saying, tell us why we shouldn't throw out this case given that this is a novel legal theory that could be very problematic, not only for the pharma industry, but otherwise.
They're going to rule on, then we had arguments and post-argument briefings. The California appeals court will rule on that in the coming months. The bar to throw out all 25,000 cases is very high. Whether we win there or we win subsequently at trial or at the California Supreme Court, we're confident that we'll win at the end.
Michael Yee
So they had asked the plaintiffs to provide more information. The judge could either throw the case out or it goes to trial where you think you have a strong case.
Andrew Dickinson
Yes, you'll start to have a couple of key bellwether trials, they call them. And again, there's a lot about this case that's subject to a protective order that we can't share. But what I can say is we have complete confidence in our legal position and our claims. The other thing, Michael, that's important to highlight is this is totally different than what many of the European companies went through.
Michael Yee
That's where -- the summary in context. Santa Fe, GSK, some of those that had weight on the stock because people don't like uncertainty about that. You have not taken any financial reserves on any of this?
Andrew Dickinson
No financial reserves. And again, this is a different set of claims. Again, this is not a defective product claim. This is a duty to innovate claim, which is a novel legal theory. So it's really, it's happens in life.
Michael Yee
All right, so you feel good about that. There is an update on that. It may go to trial. But again, we've sort of summarized that. You feel good about HIV. We talked about Capsid, long-acting. And you talked about some of the pricing issues.
Andrew Dickinson
Right. Can I mention one other thing on HIV before we go to oncology? There are two other product launches that I would expect would come that people should be aware of and focusing on. One is a daily combination of our leading integrase inhibitor Bictegravir together with Lenacapavir. This is a two-drug combination. We had very promising phase one, two data that we're looking forward to sharing next year. We're moving into late-stage studies. So when you think about the, you know, next to BIKTARVY, the other leading competitor in the HIV treatment space is a doublet of two. This would be very similar.
Michael Yee
I saw this on Pipeline. So you would, we need more than Capsid generally for treatment of HIV. Correct. For treatment of HIV, your next step is to take Capsid as a once every six months. You would take a daily BIKTARVY. Yes. But that's how you would have two antivirals.
Andrew Dickinson
Yes. It's a little bit different in that the answer is yes. Capsid or Lenacapavir is the new backbone we believe for all of our next generation HIV therapy.
Michael Yee
Once every six months, very subcutaneous.
Andrew Dickinson
Well, but no, but you don't have to, the beauty of Capsid, our Capsid, it can be formulated as a once daily pill, a once weekly pill, every three months subcutaneous or every six months subcutaneous. So what we're studying with BIKTARVY is a once daily co-formulated pill of Lenacapavir, a very small dose together with BIKTARVY. We also have promising data of a once weekly oral with another novel integrase inhibitor together with Capsid that would also be a once weekly Capsid.
Michael Yee
Islatravir?
Andrew Dickinson
No, that's separate from Islatravir. This is our own integrase.
Michael Yee
You have a weekly integrase pill to go with the weekly Capsid pill?
Andrew Dickinson
Right, so to step back, we have nine weak molecules that are in development to partner with Lenacapavir. Three of them are in phase II, three of them are in phase I, three of them are preclinical, five of them are integrase inhibitors. We have a wealth of compounds that you're going to see data on in the coming years that are another big part of the HIV treatment story and the evolution of our HIV business.
Michael Yee
So for those writing down the catalyst, 2024 you will get some of this BIKTARVY, Lenacapavir data, a daily pill and the opportunity to be a weekly pill
Andrew Dickinson
In addition to the phase III prep data.
Michael Yee
So those three drivers that are improving on and expanding the prevention.
Andrew Dickinson
An already growing portfolio, exactly. All right.
Michael Yee
So now with five minutes left, let's talk about, it's important, $15 billion in revenue there we're talking about. So what is also important is, number one, Tredelvi. You guys acquired Immunomedics, drug is approved, obviously growing, launching in breast cancer. That said, another European pharma down the hallway has been reporting data both in second line lung cancer, that was just at Esmo, and in HR positive breast cancer.
And next year they have first line triple negative. So they're working to come on onto your home court. How does investors think about that, TROP2 versus yours, and why do you feel confident you're going to have steady growth of this when they have a competitive drug?
Andrew Dickinson
Yes, well I think, first of all, we had a theory and a thesis when we acquired Immunomedics years ago that not all TROP2 antibody drug conjugates are alike. And that the Immunomedics construct, which is Tredelvi and is now approved in three separate solid tumor indications, it's a billion dollars roughly of sales this year, growing rapidly, is very differentiated. And for those of you that understand kind of antibody drug conjugates, there are four parts of our construct that are completely different than the competitor's TROP2 antibody.
First of all, our antibody has much higher binding affinity to TROP2 than the competitor antibody. Secondly, we have a completely different linker. Our linker is hydrolyzable, which means that when the ADC gets into the tumor microenvironment, a portion of the antibody drug conjugate is taken up and transported into the cell to kill the cell. A large portion, the linkers are cleaved and the toxin is released in the tumor microenvironment.
We think that can make a big difference, for instance, in squamous cell, non-small cell lung cancer, we'll get to that. Our antibody drug conjugate ratio, I think they call it the ADR ratio, is much higher than the competitor. It's very similar to in HER2/HR irinotecan at 7.6 kind of toxic warheads per antibody. And then the final thing is that our toxin is very different. Our toxin is a derivative of ES, it's a thousand times more.
Michael Yee
So people see at ESMO, they had second line lung cancer data, they hit on PFS, wait for mature OS, they believe that they're going to file on lung cancer. However, a lot of the benefit was driven on non-squamous. It was asked on the call, I asked on the call, that you believe that you will show a benefit both in non-squamous and squamous. You kind of just talked about some of those reasons you think there's better affinity and greater uptake in those cells, I think that's what you're saying. And so you feel very comfortable that you will have strong data. I mean, based on what you're saying, you think you're going to have better data?
Andrew Dickinson
Well, we think we have a, I mean, Yes, I mean, the answer is yes, we expect to have better data.
Michael Yee
That's a big catalyst, by the way. If you had positive data that was better on PFS than they do
Andrew Dickinson
I am pretty confident the industry would be very excited about that. Just step back today, you have, if you look at our existing breast cancer data and our existing relatively small set of lung cancer data that we shared earlier this year, that's exciting, this data is in more advanced, more heavily pre-treated patients.
Again, it's not an apples to apples comparison. It's hard to do cross trial comparisons with all those caveats. If you look at our data, our view, of course, is that it's every bit as good, if not better than the data that we just saw from the competitor in their studies. We have our second line, phase three, second line non-small cell lung cancer trial, which is EVOKE-01, we'll be reading out in the first half of next year.
We have a wealth of additional data coming from our phase two study in first line non-small cell lung cancer. We do, by the way, in our small data set in lung cancer, we're seeing a benefit in squamous cell patients. So again, the other thing I would highlight is these two competitors have very different side effect profiles. They are completely different, which underscores our point that the ADCs are not the same.
Michael Yee
If you show, what data is, we'll go back to this. You're saying there's data that shows that you are very good in squamous. Well, that it's active in squamous.
Andrew Dickinson
It's active in squamous. That's what we're saying. And the competitor data suggested that their construct is not active in squamous. So again, the data is going to be important. We have a lot of data. Maybe what I would reiterate with the oncology portfolio, whether you look at Tredelvi or you look at our cell therapy portfolio with Kite, which is really exciting. We have a BCMA construct that's partnered with Arcelex. There is a wealth of data coming over the next 12 to 18 months that is really going to give you a sense definitively of where we stand relative to the competitor and whether our thesis in the acquisition really plays out.
Michael Yee
So 60 seconds. Number one, how do you feel about the BCMA Arcelex CAR T at ASH coming in a few weeks? You feel that is rock solid and absolutely competitive and as good as the competitor?
Andrew Dickinson
We are very excited about this BCMA program. I think it has the potential to be a best in class therapy, cell therapy for multiple myeloma. It looks, the early data looks outstanding.
Michael Yee
And the durability is going to be holding up and it's going to look rock solid.
Andrew Dickinson
Again, I'll let you see the data. I love how you lead me to these answers. But the data that we've shared to date is very exciting and we look forward to sharing more data and I'll leave it to our partner to kind of take the lead there. But we're excited about this program.
Michael Yee
We will see you at ASH. Thank you very much. Thank you. Appreciate it.
Andrew Dickinson
Thanks for having us. Thank you. Thank you.
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Gilead Sciences, Inc. (GILD) Jefferies London Healthcare Conference (Transcript)